It seems that early in my adult life I was constantly requiring rewards, payday would come along and the money would not even burn a hole in my pocket because it was never going to arrive there in the first place.
The advent of TV and the glossy magazines and billboards that dominate our society became a constant reminder that I should buy stuff to be happy, apparently, that was the only thing that could make me happy and content, stuff.
But it never did in the long run.
So, I bought more.
I've talked before about the credit trap, and from my own personal experience, it is a very elaborate trap that is extremely difficult to escape from.
The group Pink Floyd, defined our society as a machine, and what an efficient machine it is. The machine educates all levels of the consumer society, enticing us all into spending hard earned cash on the "must have" things that are needed, to be happy.
Once again, Jimmy has his two cents worth here:
"Some spend money that they do not have, to buy things they do not need, to impress people they do not like...."
That's a good point and back to my mothers comment about "all fur coat and no knickers" where it is actually the facade of wealth that needs to be portrayed to win points over other people. The reverse of this are the people in our society, who have a lot of money, and are quite happy to hang around in their old brown shoes and jeans, with no requirement or urge to impress.
But, enough about me.
I digress somewhat, the key thing here is although the credit trap is elaborate and well honed, it is reasonably easy to avoid if you take a contrarian approach to what the machine is telling you. Yes, it is a consumer society but leave the frenzied buying to the rest of them, as I've said before, you have to stop digging to get out of the hole.
If you are already in the trap, well, admit it and do something about it. There are non profit agencies out there that can offer good advice and constructive help, again be wary of anything that is free and always look for "traps within the trap" where those that offer to help are just after their own piece of your misery.
At the end of the day, there is really only one person who can control what you spend.
And that be you.
Thursday, November 29, 2007
Wednesday, November 28, 2007
Pinch of Salt
Please remember one thing about financial advice.
"Don't take it personally, just take it seriously"
We've seen people arrive at the clubhouse, listen to our advice and become uncomfortable. It's a familiar sight here and at many financial seminars we've attended, throngs of people who listen, smile, but never act on the advice.
On a more personal basis, I've talked to people at work, about how to save money, and suddenly an invisible shield is thrown up, the perception appears to be that I was having a go, being critical of a chosen lifestyle.
Or they think I'm a nutter....
Well, they could be right about that one, but, advice is just that, it's never an attack on your choices, it's just words and information, it could be right, wrong or misguided.
But, you should listen.
Seriously.
"Don't take it personally, just take it seriously"
We've seen people arrive at the clubhouse, listen to our advice and become uncomfortable. It's a familiar sight here and at many financial seminars we've attended, throngs of people who listen, smile, but never act on the advice.
On a more personal basis, I've talked to people at work, about how to save money, and suddenly an invisible shield is thrown up, the perception appears to be that I was having a go, being critical of a chosen lifestyle.
Or they think I'm a nutter....
Well, they could be right about that one, but, advice is just that, it's never an attack on your choices, it's just words and information, it could be right, wrong or misguided.
But, you should listen.
Seriously.
Sunday, November 25, 2007
What Mother should have said
The Scottish member, Jimmy, has been diligent in making money an interesting topic for his two children and his son has aquired an interesting perspective on it all.
"The bigger the house the bigger the mortgage, the bigger the car the bigger the car loan and the bigger the TV the bigger the line of credit"
Absolute common sense, but quite the comment from a 10 year old to his 8 year old sister!
In my house, growing up was always about money, but very little of what was going on financially "with the grown ups" was ever discussed, probably because they were too busy making ends meet.
"children should be seen and not heard"
At my schools, primary and secondary, it was very important in the curriculum that we be educated regarding Pyramus and Thisbe, the Capital of Yugoslavia or the importance of Venn diagrams. The subject of Economics was so vast and complicated that it never lowered itself to teaching the basics of running a bank account, balancing a budget or saving for retirement.
The point here is that, as you learn to master your own finances, take time to teach your children the same, sure, fiscal responsibility may be a huge topic for an 8 year old (or an 80 year old) but if you start them young they will at least know the basics for when they stop spending your money and start saving their own.
"The bigger the house the bigger the mortgage, the bigger the car the bigger the car loan and the bigger the TV the bigger the line of credit"
Absolute common sense, but quite the comment from a 10 year old to his 8 year old sister!
In my house, growing up was always about money, but very little of what was going on financially "with the grown ups" was ever discussed, probably because they were too busy making ends meet.
"children should be seen and not heard"
At my schools, primary and secondary, it was very important in the curriculum that we be educated regarding Pyramus and Thisbe, the Capital of Yugoslavia or the importance of Venn diagrams. The subject of Economics was so vast and complicated that it never lowered itself to teaching the basics of running a bank account, balancing a budget or saving for retirement.
The point here is that, as you learn to master your own finances, take time to teach your children the same, sure, fiscal responsibility may be a huge topic for an 8 year old (or an 80 year old) but if you start them young they will at least know the basics for when they stop spending your money and start saving their own.
Tuesday, November 20, 2007
Ten things mother might have said.
I've compiled a list of money sayings or proverbs, some that came from mother.
1) Look after the pennies and the pounds will take care of themselves
This is something we advocate at the Millionaires Club, be frugal, don't waste your pocket change and over time you'll see the benefit.
2) Pay yourself first
I don't know if Dave Chilton (The author of The Wealthy Barber) was the first to coin that phrase, but, saving money as soon as you are paid works. If you immediately save 20% of your paycheck, you will learn to live on the remainder.
3) Money does not grow on trees
That's so true, most of us have to work extremely hard (and long) for our money, so why is our first instinct to waste it?
4) A fool and his money are soon parted
Impulse buys, instant credit, no money miracles. They'll get your cash off you if you don't think before you spend. If a deal seems to good to be true, then it probably is.
5) Those who seem the luckiest have often worked the hardest
Make no mistake, it's often not about luck or being in the right place at the right time, It's about hard work, frugality and common sense.
6) She's all fur coat and no knickers
This was mothers comment about people who bought items on "hire purchase" or the "never never" and often indicated a person who put up a facade of wealth and funded it with debt. If you follow the Millionaires Club, you'll realise that we don't like debt of any sort.
7) Money won't buy happiness
This is true, won't buy you love either, but a lot of family discussions and arguments focus on money, if you have it, it's just one less thing to worry or fight about. That is until your kids read the will.....
8) You won't win the lottery if you don't buy the ticket
Face it, You're not going to win the lottery, try the get rich slowly approach instead. If you plan and are wise with your money, you will have the equivalent of a lottery win over a period of two decades, plus, that time will go by quickly, believe me.
9) It takes money, to make money
The magic of capital gains, dividend yield and compound interest, topics we should discuss in depth at some stage. There are resources on the web that can show you how impressive the effect of compound interest can be over those 20 (short) years of saving. One dollar, invested at ten percent over twenty years will increase almost seven fold. Start now.
10) The best way to stop digging is to put the spade down
This is back to avoiding debt, especially credit cards, car loans and anything else that will allow you to buy stuff that you can't afford. Live below your means, fill in that hole and stand on level ground. Only then can you start to build your mountain of money and afford to retire early. Stop now.
Mother was usually right, but unfortunately, it took me the best part of three decades before I realised and began my plan.
You can start your plan right now.
1) Look after the pennies and the pounds will take care of themselves
This is something we advocate at the Millionaires Club, be frugal, don't waste your pocket change and over time you'll see the benefit.
2) Pay yourself first
I don't know if Dave Chilton (The author of The Wealthy Barber) was the first to coin that phrase, but, saving money as soon as you are paid works. If you immediately save 20% of your paycheck, you will learn to live on the remainder.
3) Money does not grow on trees
That's so true, most of us have to work extremely hard (and long) for our money, so why is our first instinct to waste it?
4) A fool and his money are soon parted
Impulse buys, instant credit, no money miracles. They'll get your cash off you if you don't think before you spend. If a deal seems to good to be true, then it probably is.
5) Those who seem the luckiest have often worked the hardest
Make no mistake, it's often not about luck or being in the right place at the right time, It's about hard work, frugality and common sense.
6) She's all fur coat and no knickers
This was mothers comment about people who bought items on "hire purchase" or the "never never" and often indicated a person who put up a facade of wealth and funded it with debt. If you follow the Millionaires Club, you'll realise that we don't like debt of any sort.
7) Money won't buy happiness
This is true, won't buy you love either, but a lot of family discussions and arguments focus on money, if you have it, it's just one less thing to worry or fight about. That is until your kids read the will.....
8) You won't win the lottery if you don't buy the ticket
Face it, You're not going to win the lottery, try the get rich slowly approach instead. If you plan and are wise with your money, you will have the equivalent of a lottery win over a period of two decades, plus, that time will go by quickly, believe me.
9) It takes money, to make money
The magic of capital gains, dividend yield and compound interest, topics we should discuss in depth at some stage. There are resources on the web that can show you how impressive the effect of compound interest can be over those 20 (short) years of saving. One dollar, invested at ten percent over twenty years will increase almost seven fold. Start now.
10) The best way to stop digging is to put the spade down
This is back to avoiding debt, especially credit cards, car loans and anything else that will allow you to buy stuff that you can't afford. Live below your means, fill in that hole and stand on level ground. Only then can you start to build your mountain of money and afford to retire early. Stop now.
Mother was usually right, but unfortunately, it took me the best part of three decades before I realised and began my plan.
You can start your plan right now.
Monday, November 12, 2007
Education Savings Plan
If you are a Canadian, with a child, you should be taking advantage of an RESP.
A Registered Education Savings Plan is a type of savings account that grows tax free until a child is ready for post-secondary education. RESPs are a good way to save for a number of reasons:
* the money grows tax free until the child needs it for tuition, residence and other educational expenses;
* an RESP allows you to apply for the Canada Education Savings Grant on your child's behalf;
The idea is that, once again, the Canadian Government is encouraging you to save money and is providing a tax shelter, which is good, and as a secondary incentive you can apply for the Canada Education Savings Grant which will provide an additional government contribution to the RESP, for each eligible child.
If you contribute $2500 to the RESP, the government will contribute an additional $500 which is an immediate return of 20% in the first year.
More information is available at :
http://www.hrsdc.gc.ca/
A Registered Education Savings Plan is a type of savings account that grows tax free until a child is ready for post-secondary education. RESPs are a good way to save for a number of reasons:
* the money grows tax free until the child needs it for tuition, residence and other educational expenses;
* an RESP allows you to apply for the Canada Education Savings Grant on your child's behalf;
The idea is that, once again, the Canadian Government is encouraging you to save money and is providing a tax shelter, which is good, and as a secondary incentive you can apply for the Canada Education Savings Grant which will provide an additional government contribution to the RESP, for each eligible child.
If you contribute $2500 to the RESP, the government will contribute an additional $500 which is an immediate return of 20% in the first year.
More information is available at :
http://www.hrsdc.gc.ca/
Close Shave
I've just finished shaving, sort of the old fashioned way, soap and razor.
Well, sort of the old fashioned way, the soap being the aerosol kind and the razor was a kindly donated Gillette Fusion, five blade, twin lube strips, all bells and whistles.
It must be, I've just seen Tiger Woods on the telly with one, and yes, by golly the thing gives an excellent shave. It's quite the coincidence that I received the razor as a freeby at the last company golf tournament.
What has this to do with a financial blog and the Millionaires Club?
It appears to me, that every time we receive something free, or amazingly cheap, there is a big catch and often a financial penalty if we don't do our homework.
Gillette make great razors and Hewlett Packard make great inkjet printers and both companies use the "loss leader" approach to selling their products. There may be other examples, but these two come to mind.
This is how it works, basically, the original product is free or very cheap, and it comes with an introductory blade cartridge. Thanks very much. The shock comes when you need to replace the cartridge and you realise that the product is "back end" loaded, that is, the replacements are incredibly expensive.
The same is true with inkjet printers and is particularly painful with the color printers. HP have been giving these printers away in many of the major electronics chains, buy a laptop or desktop PC and hey, here's a free inkjet printer. If they're not giving them away, well, I've just checked and you can buy one right now for sixty bucks at Future Shop.
You probably get the point, the cheap printer comes with introductory ink cartridges with about a 25% loading of ink, when you've cranked through those in the first month and need replacements, you'll find that, combined, they'll cost more than the original printer purchase (if you paid for it).
If you receive a "gift horse" take your time to look into your financial consequences, a free razor is fantastic, as long as you don't play their game, a free printer is excellent, but take it down to Goodwill when it's empty.
Jimmy says, If you really need a quality printer, see what the best deal is out there, do your homework, find out how much it costs per page and hey, once you realise that, don't buy another, just take all your documents to work on a USB stick and print them out for free.
Well, sort of the old fashioned way, the soap being the aerosol kind and the razor was a kindly donated Gillette Fusion, five blade, twin lube strips, all bells and whistles.
It must be, I've just seen Tiger Woods on the telly with one, and yes, by golly the thing gives an excellent shave. It's quite the coincidence that I received the razor as a freeby at the last company golf tournament.
What has this to do with a financial blog and the Millionaires Club?
It appears to me, that every time we receive something free, or amazingly cheap, there is a big catch and often a financial penalty if we don't do our homework.
Gillette make great razors and Hewlett Packard make great inkjet printers and both companies use the "loss leader" approach to selling their products. There may be other examples, but these two come to mind.
This is how it works, basically, the original product is free or very cheap, and it comes with an introductory blade cartridge. Thanks very much. The shock comes when you need to replace the cartridge and you realise that the product is "back end" loaded, that is, the replacements are incredibly expensive.
The same is true with inkjet printers and is particularly painful with the color printers. HP have been giving these printers away in many of the major electronics chains, buy a laptop or desktop PC and hey, here's a free inkjet printer. If they're not giving them away, well, I've just checked and you can buy one right now for sixty bucks at Future Shop.
You probably get the point, the cheap printer comes with introductory ink cartridges with about a 25% loading of ink, when you've cranked through those in the first month and need replacements, you'll find that, combined, they'll cost more than the original printer purchase (if you paid for it).
If you receive a "gift horse" take your time to look into your financial consequences, a free razor is fantastic, as long as you don't play their game, a free printer is excellent, but take it down to Goodwill when it's empty.
Jimmy says, If you really need a quality printer, see what the best deal is out there, do your homework, find out how much it costs per page and hey, once you realise that, don't buy another, just take all your documents to work on a USB stick and print them out for free.
Saturday, November 10, 2007
Keep your money
You will probably already know this, but, it always helps to be reminded.
You do what your parents did, you save up 25% and you buy a house, the remaining 75% of the purchase cost is taken as a first mortgage.
House cost : $200,000
Deposit : $50,000
Mortgage : $150,000, amortization over 25 years, rate = 6%
This will mean that your monthly payments, excluding taxes, utilities, beer and cheese will be $959.71
25 years, 12 payments a year, your $150,000 loan costs you $287,913 and of course, not forgetting that in Canada there are no tax breaks on mortgages, that money is after tax money, if you pay taxes at around 30% you will have to earn around $374,286 to make those payments.
Everything we buy, we buy with after tax dollars. Even RSPs are funded with those discounted dollars, fortunately, the government gives us the taxes back when we save through a registered plan.
So, back to the mortgage, hopefully you realise how much it will cost you and will take the following steps to destroy your mortgage as quickly as possible.
1) Reduce the Amortization period (your monthly payement will go up)
2) Pay Biweekly, not monthly (your net monthly payment will go up)
3) Use that tax rebate (from your RSPs) to pay it off
4) Always be as aggressive as possible with interest rates, shop around
5) Make sure your mortgage is flexible, with good paydown options and no penalties
Item 3 answers the age old question "should I maximise my RSP or pay down my mortgage" and the answer, from the Millionaires Club, is yes. You can do both, maximise your RSP to get the maximum tax rebate, then apply that refund check as a Balloon payment to your mortgage.
Remember, there is no such thing as good debt, the plan is that you should keep your money, not give it to the banks or credit unions in the form of interest payments.
You do what your parents did, you save up 25% and you buy a house, the remaining 75% of the purchase cost is taken as a first mortgage.
House cost : $200,000
Deposit : $50,000
Mortgage : $150,000, amortization over 25 years, rate = 6%
This will mean that your monthly payments, excluding taxes, utilities, beer and cheese will be $959.71
25 years, 12 payments a year, your $150,000 loan costs you $287,913 and of course, not forgetting that in Canada there are no tax breaks on mortgages, that money is after tax money, if you pay taxes at around 30% you will have to earn around $374,286 to make those payments.
Everything we buy, we buy with after tax dollars. Even RSPs are funded with those discounted dollars, fortunately, the government gives us the taxes back when we save through a registered plan.
So, back to the mortgage, hopefully you realise how much it will cost you and will take the following steps to destroy your mortgage as quickly as possible.
1) Reduce the Amortization period (your monthly payement will go up)
2) Pay Biweekly, not monthly (your net monthly payment will go up)
3) Use that tax rebate (from your RSPs) to pay it off
4) Always be as aggressive as possible with interest rates, shop around
5) Make sure your mortgage is flexible, with good paydown options and no penalties
Item 3 answers the age old question "should I maximise my RSP or pay down my mortgage" and the answer, from the Millionaires Club, is yes. You can do both, maximise your RSP to get the maximum tax rebate, then apply that refund check as a Balloon payment to your mortgage.
Remember, there is no such thing as good debt, the plan is that you should keep your money, not give it to the banks or credit unions in the form of interest payments.
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